Global cereal production – including stable items like wheat, coarse grains, and rice – is projected to shrink in 2009 due to drought and adverse weather in the world’s major producers. With shrinking food stocks, a growing demand for biofuels, and a need for cheaper sources of raw materials like rubber and other natural resources, governments and corporations in many developed countries are seeking to secure access to these coveted commodities by leasing large tracts of land in developing countries.

In Indonesia, PT Daewoo Logistics Indonesia, a subsidiary of South Korea’s Daewoo Logistics Corporation, and Cheil Jedang Samsung recently announced a partnership to invest US $50 million to grow and process energy crops on the islands of Buru and Samba. The two companies will produce 30,000 tons of corn grain a year on 24,000 hectares and will export their entire production back to South Korea. The announcement comes on the heels of a report from the International Food Policy Research Institute, The Challenge of Hunger: The 2008 Global Hunger Index, that raises concerns about Indonesia’s already precarious food security.

Meanwhile, Saudi investors have been lobbying government officials in the Philippines to grow and export “basmati rice, corn, cassava, sugar, animal fodder, fisheries, red meat, Philippine bananas and mangoes,” reports Neil Morales in BusinessWorld. Philippine officials are hoping to leverage Saudi Arabia’s growing demand for food against the harsh economic climate to boost much-needed foreign direct investment. “Tell me an item that the whole world needs regardless of the economic situation, it is food,” said Peter Favila, the Philippine Trade Secretary, in an interview with BusinessWorld.

But securing food stocks is not the only motive behind the massive leasing of land in developing countries. A surging demand for biofuels to meet energy needs, as well as access to new sources of raw materials for manufacturing goods, appears to be driving recent land grabs. Recently, Sinopec and The Chinese National Overseas Oil Corporation, two state-owned oil giants, made investments of US $5 billion and $5.5 billion, respectively, in Indonesia to grow and process corn into biofuel to be exported to China.

Governments in these developing countries should exercise caution when granting land concessions to foreign governments and corporations. Despite the short-term investments, most – if not all – of the production will be exported, making the long-term food security situation even worse in these host countries. And according to a recent report from the U.N. Environment Programme, From Conflict to Peacebuilding: The Role Natural Resources and the Environment, environmental conditions – like severe food insecurity – linked with these poor government policies and claims of “neo-colonialism” could exacerbate existing trends and tensions in the host countries and spark violent conflict.

Even with the prospect of political unrest, however, current economic woes will likely dictate policymaking in these developing countries, with short-term payoffs eclipsing the long-term political, social, economic and security consequences.

Photo: In the northeastern coastal city of Tamatave, political unrest has stirred since mid-January over negotiations between the Madagascan government and South Korea's Daewoo Logistics Corporation to lease nearly half the country’s arable farmland to the company to grow and export food to South Korea. Courtesy of flickr user foko_madagascar.